Greece Parliament Approves Pension, Health Cuts in Race for Second Bailout
Greece’s parliament approved cuts in pensions and health care a day after ratifying a 3.2 billion euro ($4.3 billion) package of spending reductions to move closer to a rescue package to avert financial collapse.
Lawmakers voted 213-58 in favor of the law, Acting Parliament Speaker Grigoris Niotis said early today in remarks on state-run Vouli TV.
Approval in parliament allows Prime Minister Lucas Papademos to meet with euro-area partners this week having met most of the conditions demanded by the European Union and International Monetary Fund for Greece to get a lifeline of 130 billion euros. Finance ministers from the region will discuss the second Greek rescue program in Brussels today.
“This government will do its utmost to implement fully and effectively both the program and the complementary actions,” Papademos said in the Belgian capital yesterday. There is an “urgent need” for the reforms to be twinned with concrete measures, he said.
European governments moved toward a second rescue of Greece on Feb. 21, calculating that the cost of a fresh bailout, which includes a writedown of about 100 billion euros of Greek debt, is a price worth paying to prevent a financial collapse that could shatter the euro area.
Spur the Economy
Pension and wage cuts are reducing state spending and changes to labor rules are liberalizing the jobs market. The measures are also driving the economy deeper into a recession and fanning discontent among Greeks as unemployment has jumped to 21 percent. The economy shrank 6.8 percent last year and is set to contract for a fifth year in 2012.
Protests shut down government services and tourist sites like the Acropolis yesterday as unions held a three-hour walkout as part of a European-wide campaign against austerity measures. Greek lawmakers passed budget cuts on Feb. 13 as rioters set fire to almost 50 buildings.
The reforms approved this week will cut 12 percent off the amount exceeding 1,300 euros for those receiving pensions from the state, trim wages for all state employees and cut the minimum wage by 22 percent. Public transit workers in the capital of Athens will strike today, grounding subway and tram services.
“Greece has approved a very ambitious program,” European Commission President Jose Barroso said after meeting with Papademos in Brussels yesterday. “There is no other alternative, and I think that when there is no other alternative people understand much better the urgency of the tasks at hand.”
Standard & Poor’s (SPY) cut Greece’s credit ratings to “selective default” on Feb. 27 after the country began the biggest sovereign debt restructuring in history, a key element to the second bailout.
S&P dropped Greece’s rating from CC, two levels above default, after the government added clauses to its debt designed to coerce investors unwilling to take part in the exchange, the New York-based company said. The downgrade follows a reduction last week by Fitch Ratings to C.
Moody’s Investors Service has said it will cut the nation to its lowest rating.
The debt exchange aims to reduce national debt to 120.5 percent of gross domestic product by 2020, from 160 percent last year, and to meet the terms of the 130 billion-euro international bailout. The agreed-upon swap, known as private- sector involvement, will slice about 100 billion euros off more than 200 billion euros of privately held debt if all investors participate.
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